As violence engulfs Juárez, American companies adopt defensive measure

Published 31 March 2010

American companies relocated their manufacturing and assembly facilities to Juárez, just across the U.S. border from El Paso, Texas, to benefit from the cheap labor costs in one of Mexico’s most business-friendly cities; now, as drug-related crime has engulfed the city, these companies are erecting fences, increasing security in factories, and encouraging employees to commute in carpools; managers have gone through kidnapping simulations; some drive to work in convoys for added security

There used to be a time when American companies could not rush fast enough to relocate to the border city of Juárez because it was one of Mexico’s most business-friendly cities. Now, an entire industry is adjusting to doing business in Mexico’s deadliest town.

The Wall Street Journal’s Nicholas Casey writes that just across the U.S. border from El Paso, Texas, Juárez has turned into a murderous battleground as two rival drug cartels vie for a lucrative entry route into the United States. A dozen homicides a night is not uncommon. On Wednesday, Luis Raúl Macías Rosas, who was a manager at a Juárez maquiladora, was murdered within 600 feet of a military checkpoint, authorities said.

Some executives now carpool to work in a convoy, fearing they could otherwise be abducted. Whole factory work forces are undergoing kidnapping training. Routes to and from the bridge in El Paso are now patrolled by armed military guard.

Casey writes that until two years ago, Juárez was a thriving manufacturing hub. The 1994 North American Free Trade Agreement (NAFTA) paved the way for the rise of so-called maquiladoras, assembly lines where everything from laptops to motorcycles are built with cheap local labor and shipped back across the border tariff-free.

Dell Inc., Johnson & Johnson, and General Motors are among the many companies that contract with the assembly plants here. All told, the maquila plants employ roughly 180,000 people, according to the industry association.

Alas, “the maquila industry has now learned that the proximity to the border cuts both ways,” Caset writes. With the cartel war exploding, roughly 1,600 people were killed in 2008, up from only a few hundred in previous years. An additional 2,600 were killed in 2009, even after an effort by President Felipe Calderón to send federal police and some 7,000 soldiers into Juárez to quell the violence. Since January, 500 have died.

On 13 March three people with connections to the U.S. Consulate in Juárez were gunned down. The incident made the headlines because the victims’ connections to the U.S. government. Jorge Alberto Salcido, however, whose wife was a consulate employee, was also a manager at a Juárez assembly line of Dallas-based information-technology company Affiliated Computer Services Inc.

Casey notes that Salcido was not the first person in the industry to be caught in the crossfire. The factories weathered one wave of drug-related violence in the 1990s, followed by the unsolved disappearances of hundreds of female factory workers. In the most recent homicide wave, some managers have been kidnapped for ransom and some employees killed in carjackings.

Some foreign investors have passed on opening plants in Juárez since 2008, but the reason was more likely the recession, she says. María Soledad Maynez, president of the Asociación de Maquiladoras, the local trade group. No businesses have decided to relocate plants out of Juárez because of the violence, according to the group.

Alan Russell, president of Tecma Group LP, an El Paso-based manufacturer with seventeen factories in Juárez, told Casey that, “The unfortunate thing is that our economy slipped at the same time the drug war happened.” This has meant some unemployed Juárez residents have joined organized crime and extort local businesses for money, Russell says. The company removed all cash and even food coupons from factory premises to avoid attracting trouble, he says. Still, he adds, a number of Mexican management employees were carjacked in Juárez and several factories were stormed by armed robbers in 2008.

It is not clear how widespread the problems are because many crimes are not reported to Mexican police. Last year, there were five incidents of extortion against the factories and no homicides, according to state statistics.

Russell and other business leaders have taken concrete steps — erecting fences, increasing security in factories, and encouraging employees to commute in carpools. Some managers have gone through kidnapping simulations.

Other factory bosses have abolished overtime, and workers now head home before sunset. Some plant managers now ride to work in bulletproof cars. One senior executive has gone the other direction: He uses a beat-up 1988 Cadillac with a high-speed engine he hopes can outrun attackers.

Alberto Islas, a Mexico City security analyst who has advised companies in the area, told Casey that the maquilas are even more susceptible to infiltration by criminals posing as employees than to a direct attack from organized crime. “You need to know who’s working for you,” he says, warning that part-time criminals may look to factory warehouses as sites to store drugs like cocaine and marijuana.

Juárez’s violence is now sparking what Russell, the factory president, calls a “PR crisis,” particularly with outside investors reluctant to enter the city. “It’s more of a wait-and-see attitude,” he says.